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Where Visa Does Stand among Its Peers?


Oct. 23 2018, Updated 9:01 a.m. ET

Price-to-earnings multiples

At current market prices, Visa (V) trades at a premium valuation to most of its peers (IPAY), with the exception of Mastercard (MA) and PayPal (PYPL).

The trailing-12-month (or TTM) PE ratio for Visa is 33.04x, which is lower than Mastercard’s and PayPal’s multiples of 36.84x and 37.32x, respectively. However, Visa’s PE ratio is much higher than that of Global Payments (GPN), which trades at a multiple of 25.84x.

Based on Wall Street’s earnings forecast for the next 12 months (or NTM), Visa’s PE ratio is pegged at 26.26x. Mastercard, PayPal, and Global Payments have forward PE multiples of 28.38x, 29.32x, and 20.47x, respectively.

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Visa’s premium valuation seems justified due to the strong worldwide growth projections for digital payments. Plus, the company’s earnings growth projection for fiscal 2018 is the second highest in the space after Mastercard’s growth projection. Wall Street’s fiscal 2018 earnings growth projections for Visa, Mastercard, PayPal, and Global Payments are 31.9%, 40.0%, 23.2%, and 28.2%, respectively.

Analysts’ recommendations

Analysts are bullish about Visa (V) and foresee double-digit growth in its stock price. Visa’s consistent strong quarterly reports and its encouraging outlook for fiscal 2018 are reflected in the analysts’ ratings.

The majority of analysts recommended a “strong buy” or “buy” for Visa stock. These recommendations represented ~92.0% of the 38 analysts covering the stock. About 8.0% of analysts recommended a “hold,” and there weren’t any “sell” recommendations on Visa stock.

Analysts gave Visa a target price of $164.47, which is a 16.0% increase from the current level of $141.74. In 2017, the stock gained ~46.0%.


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